Mumbai, March 19: Ceat will shed its non-core businesses and acquire Harrison Malayalam’s (HML) rubber division in a revamp aimed at ensuring that the flagship sharpens focus on what it is good at — rolling out tyres.

Harrison Malayalam is the Kerala-based plantations outfit of the Rs 6,700-crore RPG group with a rubber wing that the Goenkas feel will benefit Ceat more.

Ceat, which will take over that division, will itself divest its non-tyre assets, mainly financial assets like investments, to a non-banking financial company in the group.

The board of directors at Harrison Malayalam took up the proposal to spin off the rubber section. Ceat’s directors also looked at ways of washing their hands of peripheral businesses. The HML board considered the plan to merge its financial subsidiary, Harrison Malayalam Financial Services, and all other non-operational subsidiaries, into the company. Both companies informed the BSE about the board meetings.

“The objective of these plans is to explore the possibility of strengthening the operations of Ceat and Harrison Malayalam,” RPG group chairman Harsh Goenka said.

While the de-merger of HML’s rubber wing will enable it to focus on its core business of tea, the merger of this division with Ceat will help it procure raw material for its tyre manufacturing activities easily.

“On the other hand, spinning off non-tyre assets of Ceat into a separate company will help make the firm more focused on its core area of tyres. We feel that the scheme, once implemented, will help build value for the shareholders of both our companies, Goenka added.

If all goes to plan, the proposals will be put into effect through a scheme of arrangement effective from October 1, 2002. The boards have appointed consultants and valuers to finalise the scheme for consideration.

Analysts feel the take-over of HML’s rubber wing will enlarge the sources from where Ceat procures its key input. “The division has a turnover of Rs 50 crore from a rubber output of 10,000 tonnes annually,” RPG officials said.

The HML board said getting rid of rubber would enable the Rs 143-crore company concentrate on tea, its mainstay. It suffered a loss of Rs 15.9 crore last year.

For Ceat, which uses up approximately 50,000 tonnes worth of rubber valued at Rs 260 crore every year, the move is a step towards vertical integration. “Rubber is an important raw material for the tyre business and backward integration will help generate synergies in a manner that cuts costs,” officials said.